Question

b. Courage Hodey Inc. owns the following properties as at 31 December 2019: Property: Fair value (GHemillion) Land with future use undetermined 3.2 Factory rented to Courage Hodey's subsidiary under an operating lease 2.4 10 floor office building (fair value is equal per floor) with 3 floors used as the subsidiary's head office and seven floors rented to third parties under an operating lease. 15.0 Empty building held for capital appreciation, but not leased out. 4.1 3 Courage Hodey's accounting policy is to hold its investment properties under the fair value model and its land and buildings under the revaluation model. Required: In accordance with IAS 40 Investment Property calculate the carrying amount to be recognised as investment property in Courage Hodey's consolidated financial statements as at 31 December 2019. 3 marks c. IAS 23 Borrowing Costs requires that borrowing costs directly attributable to the acquisition, construction or production of a 'qualifying asset' (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are to be capitalised or included in the cost of the asset once they meet certain conditions. Required: Identify THREE conditions that must be met before an entity can commence to capitalise borrowing cost. 3 marks

Answer 1

Answer:

c) The three conditions that must be met before an entity can commence to capitalise borrowing cost are;

1) Expenditure must be incurred

2)Borrowing costs are incurred

3)the activities necessary to prepare the asset for its intended use or sale are in progress.

b)According to IAS 40 investment property, the carrying amount recognised as investment property:

	Fair value(GH million)
land with future use determined	3.2
Factory rented under operating lease	2.4
7 floor office building rented under operatimng lease	10.5
Empty buildinh held for capital appreciation	4.1
	20.2